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Shell gets stake in Atlantic for US$4.1b

Royal Dutch Shell plc will benefit from immediate cash flow following its acquisition of Repsol’s stake in Point Fortin-based Atlantic liquified natural gas (LNG) company.

In a statement yesterday, Royal Dutch Shell plc announced completion of the acquisition of Repsol’s LNG portfolio outside North America for a headline cash consideration of US$4.1 billion. As part of the transaction, Shell will also assume US$1.6 billion of balance sheet liabilities relating to existing leases for LNG ship charters, substantially increasing the shipping capacity available to Shell’s LNG marketing business.

“The deal gives Shell an additional 7.2 million tonnes per annum (mtpa) of directly managed LNG volumes. The company’s already diverse and flexible portfolio will be boosted with LNG supply in the Atlantic from Trinidad and Tobago, and in the Pacific from Peru. In addition, it immediately contributes additional cash flow, while requiring limited ongoing capital expenditure,” Shell said.

Since the announcement of the transaction in February 2013, certain value adjustments have been made in accordance with the terms of the sales and purchase agreement. These are expected to lead to a net cash purchase price of US$3.8 billion, subject to post closing adjustments, the company said. The purchase price announced in February 2013 was US$4.4 billion. Balance sheet liabilities also changed from US$1.8 billion in the initial announcement to US$1.6 billion at present.

“This includes the exercise of pre-emption rights of the BBE power plant in Spain by an existing partner as well as other adjustments such as the financial performance of the portfolio and working capital movements since the effective date of October 1, 2012,” Shell said.

The deal closed in 2014, the company was careful to say. Shell’s capital investment in the fourth quarter (Q4) of 2013 will reflect US$3.4 billion for the Repsol transaction with the remaining US$2 billion booked in 2014. Of that US$2 billion, US$1.6 billion is a non cash item relating to finance ship leases, the company said. Shell said the transaction will add:
• Net 4.2 mtpa equity LNG plant capacity, increasing the company’s equity LNG capacity by around 20 per cent, from 22 mtpa to 26 mtpa.
• Atlantic LNG trains 1-4; 14.8 mtpa capacity on a 100 per cent basis (20-25 per cent equity per train); operated by Atlantic LNG Company of T&T.
• Peru LNG 4.45 mtpa capacity, on a 100 per cent basis (acquisition: 20 per cent equity: 100 per cent offtake); operated by Peru LNG Company.
• A fleet of LNG carriers, comprising both long term and short term time charters.
• 7.2 mtpa of LNG volumes through long term off-take agreements.
• As part of this agreement, Shell has committed to supply around 0.1 mtpa of LNG to Repsol’s Canaport LNG terminal in Canada over a period of ten years.

Repsol remains strong in T&T with its interest in the Teak, Samaan and Poui fields, and—in partnership with BHP Billiton—is set to enter the deep waters of T&T this year in Block 23(b), off the east coast of Tobago. Shell’s newly acquired stake in Atlantic is now added to its lubricants blending plant in Point Lisas, increasing the portfolio of assets managed out of the Shell Venezuela office by one.